Commercial solar energy is intended for businesses. Solar power is a clean, renewable energy source and is a highly successful energy-saving technology. Many clients, from governments and major corporations to small businesses and educational institutions, use commercial solar energy.
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A photovoltaic (PV) panel used for commercial purposes transforms solar energy into electricity. The method to transform sunlight into electricity is known as photovoltaic.
Commercial-grade photovoltaic (PV) solar panels are constructed of silicon solar cells with positive and negative layers, generating an electric field. A solar array is created using commercial-grade solar panels that are connected. It is a group of solar panels that are joined together. They are also called photovoltaic arrays. They are located on a big ground or a building’s rooftop.
Since a building’s rooftop receives the most sunshine, the renewable energy source for solar energy, rooftop commercial solar system projects, are popular among businesses. Continue reading to learn about these commercial solar PV systems in detail.
A commercial solar PV system uses solar panels installed on commercial buildings to harness solar energy and produce power. Depending on the size of the installation, the power produced covers most of the company’s energy requirements and can significantly lower energy costs. Public infrastructures like schools, hospitals, and libraries can also benefit from solar power and lower carbon emissions.
Solar panels are incorporated into the commercial electricity network and placed on nearby lands, buildings, and roofs. The photovoltaic system, also referred to as a solar PV system, converts solar energy into electricity, which fulfills all the energy needs of the building.
You can obtain solar energy from solar panels throughout the year, particularly in the summer. You can also install storage systems to use power after sunset.
Commercial solar panels are an excellent source of clean, renewable energy because they emit no carbon dioxide and you don’t have to worry about frequent maintenance.
Businesses can significantly lower their electricity bills and carbon impact using commercial solar panels. Installing commercial solar systems, or solar arrays, on the rooftops of residential or commercial buildings can provide enough solar electricity to meet the total energy requirements of the building.
The electricity produced by solar arrays can power inside and outside areas at a reasonable price. Most people have experienced more than 25% savings from their traditional electricity providers after switching to commercial solar systems. Businesses also use this approach to fight against global warming and save the planet for future generations.
You can use solar energy to reduce electricity costs for your business that operates during day time. High electricity consumers gain a lot from this technology.
You will experience a return on your investments after 4 years of installing commercial solar. Investing in solar renewable energy can save money with less energy usage.
Financial gain is a major factor in installing solar, and there are significant financial benefits. Solar PV system delivers electricity for about 9 cents per kWh. The operations and maintenance costs are included in it. However, the current grid supply pricing generates 13 cents per unit.
When you finance the capital expenditure, your commercial solar PV system can provide enough benefit to create a positive cash flow within 60 months. Solar panels do not have moving parts; thus, they require little to no maintenance.
Knowing where to begin might be difficult because there are so many different types of solar panels available. We will discuss some of them below:
A solar panel often lasts several decades, although some parts require upkeep and replacement. This is the most expensive and important aspect of your system.
Solar energy allows businesses to become more sustainable in every way. Solar installations help businesses to manage their electricity expenses and carbon footprint. We will discuss the benefits of installing a commercial solar PV system below:
1. Lowered Operating Costs
Going solar may affect the environment, but businesses opt for it to save long-term operational costs. PV solar energy is widely used in industries; it is a more accessible and reasonably priced energy source. It allows businesses to own an asset to generate their power rather than buying electricity from other external energy suppliers and utilities.
You can raise the value of your real estate by constructing a clean energy power plant on-site and installing a commercial solar-powered system, which makes you your own electricity supplier.
Solar installations stabilize your electricity costs and provide a more predictable revenue flow than the external energy you acquire at highly billed rates. You can consider them as a multi-decade investment for your company.
Property managers estimate project costs and future energy production to evaluate your solar installation’s total return on investment. It is due to the low maintenance costs associated with solar systems.
Initial costs usually prevent property owners from going solar, but there are many benefits and incentives to make it a more accessible option for large enterprises to embrace solar energy solutions.
2. Enhanced Energy Control and Resilience with Commercial Solar
Companies with PV solar energy systems are less dependent on public utility providers and other outside sources to meet their energy demands because they can produce sustainable electricity on-site.
Sometimes, grid-tied solar systems go off during a blackout if electricity is not safely supplied back into the local power grid. Solar providers are now incorporating a significant number of commercial solar power systems.
A solar system that has a storage system operates independently as a microgrid. It allows electricity to be continually generated, stored, and used across the property. Companies can strengthen their energy resilience by operating off the grid. When a local power failure occurs, operations are entirely stopped. Having your own commercial solar PV system helps businesses from such disasters.
3. Solar Energy Accomplishes ESG Goals
One of the main reasons companies switch to solar energy is that it helps an organization achieve its social, environmental, and governance objectives. Going solar is not just about cost savings, even though it will probably show a financial benefit on a company’s balance sheet.
Solar power is a very efficient solution for businesses to achieve sustainability goals since it is a measurable and easily quantified green energy asset. Commercial solar energy reduces a building’s carbon footprint as soon as it starts operating; this process is known as immediate decarbonization.
Additionally, most solar-powered systems are very simple to operate and don’t require significant adjustments to regular corporate operations. In most cases, adding an installation to a property won’t interfere with regular operations, allowing a business to carry on as usual.
The overall environmental impact of a solar power installation can be improved in conjunction with other suggested property changes, such as modernized appliances and updated building features, which are carried out by an energy efficiency assessment.
4. Federal Investment Tax Credit
Federal Investment Tax Credit, also known as ITC, is the main incentive that has decreased the cost of solar installation during the last decade. Qualified enterprises can reduce a significant portion of the system expenses from federal income taxes paid by using the ITC.
Sadly, institutions like religious organizations, schools, and other places are not eligible to apply for this credit if they fail to submit yearly income tax returns. In some instances, Tax Equity Financing or third-party ownership can assist firms without a significant tax liability to still benefit from the ITC and a PV system with a lower initial outlay.
5. Amount of Land Required for Commercial Solar Projects
Solar arrays of a commercial solar system can range in size and number. How much land is required is based on the following:
When buying commercial solar systems for business, you should consider some essential factors. For instance, if you intend to construct a solar farm, remember that 100 square feet is required for 1 kW of solar panels, and 200 square feet is required for a utility-scale project. Most solar provider companies work primarily with companies that have rooftop space for solar installation.
Commercial solar is something of an enigma. Falling between the better-known residential and utility-scale solar industry sectors, commercial solar — or C&I solar as it’s often called, referring to commercial and industrial scale — encompasses a wide variety of customer types, solar designs, and project sizes. It also differs from residential solar in some key ways.
As Ian Clover, Manager of Corporate Communications for Hanwha Q Cells explains, “In the jargon-heavy world of solar-speak, C&I handily condenses Commercial and Industrial into a snackable sub-section of the PV industry. But as subsections go, the C&I space has perhaps the greatest scope for flexibility, offering a raft of possibilities from ground-mount through to ingenious use of rooftop space.”
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For a variety of reasons we’ll touch upon in this article, commercial solar has been slow to take off, but there are signs that this sector is poised for significant growth. And, for those who learn to navigate the complexity of these projects, the rewards can be big.
This article is part of a series, in which we delve into a variety of aspects of commercial solar to help solar professionals understand the dynamics of this unique sector.
In today’s article, we offer a brief intro on what commercial solar is, the scale of this sector, and some of the factors that have constrained its expansion, as well as forecasts for future growth.
In other articles, we discuss the different players involved in commercial solar projects, how to sell a commercial solar project, and what financing for these projects may look like.
Commercial solar may seem straightforward — solar for businesses as opposed to residential solar for homes. However, commercial solar encompasses a variety of different types of customers and projects. In addition to businesses of different sizes, from large corporations to local small businesses, “commercial” solar customers can also include governments, schools and universities, and even nonprofits.
Commercial solar projects may take the form of rooftop arrays on buildings or ground mounts, and can range widely in size from kilowatts to megawatts. According to Joe Naroditsky, Director, Solar & Operations at the Community Purchasing Alliance (CPA), an organization that connects nonprofits with solar bids, the C&I solar projects his organization facilitates can range in size from 50 kilowatts (kW) for small churches and synagogues to 300-400 kW for large schools.
And that’s just the tip of the iceberg.
With the help of Aurora solar software, researchers at UC Davis have examined the real-world solar potential of some of the largest commercial buildings in the United States.
Their review of the largest commercial building in the U.S., a Texas-based aerospace company with 770,000 square meters of rooftop, found that it could generate 88 million kilowatt hours (kWh) of clean energy! As explained in the Washington Post, “That’s enough to power nearly 5,200 homes for a year, offset 47,800 metric tons of CO2, and spare up to 388 acres of land.”
Obviously, this is the extreme end of the spectrum, where building rooftops rival the scale of utility-scale projects, and this site has not been developed with solar. However, it serves to illustrate the variation in potential project sizes in a sector where the buildings and customers differ widely.
As you begin to read up on the commercial solar sector, one of the common refrains you’ll see is that this market has not grown nearly as rapidly as residential or utility-scale solar. As noted in PV Magazine, “The commercial and industrial (C&I) solar markets have been a relative challenge for solar developers to exploit.”
There are a number of factors that have contributed to C&I lagging behind residential solar. For one, commercial electricity prices are historically lower, which can make the economics of solar a little trickier.
As Mark Berger explains in PV Magazine: “The C&I sector has trouble competing against an average 15% or more lower price per kilowatt-hour rate than residential electricity prices, according to the U.S. Energy Information Agency. ”
According to the U.S. Energy Information Administration, in February of the average cost of electricity for U.S. residential customers was 13.3 cents per kilowatt hour (kWh), while the cost for commercial customers was 11.9 cents per kWh.
Another barrier relates to the fact that in many commercial buildings the occupant is not the building owner. This “split incentive” means that the building owners who would make the decision to install solar are often not the ones paying the utility bills, making solar energy savings less of an incentive for them.
Financing is also more complex in the C&I solar space, and according to some contractors we’ve spoken with, less accessible. That is beginning to change, however, as financing mechanisms for this space become better understood by financial actors and there are more successful projects for financiers to look at to assess risk.
Financial viability is the first major hurdle in solar sales, as any solar installer knows. Commercial solar systems can therefore be a trickier sell.
However, as explained in Solar Power World, “Commercial solar and now community solar are advancing beyond bureaucratic budgetary boundaries by systemizing structures for the private sector, consumers and third parties to partner and invest in energy infrastructure assets.”
One of the major things easing financing is the introduction of power purchase agreements (or PPAs). PPAs have allowed investors to take on the pressure of large upfront commercial solar costs, with the consumers paying off the system a little bit at a time.
Other barriers include, “contracting challenges, the mismatch in building lease and PV financing terms, and high transaction costs relative to project sizes,” according to a National Renewable Energy Laboratory (NREL) report.
Many of the challenges in this sector are already being surmounted. A white paper by the Solar Energy Industries Association (SEIA) and SolarKal highlights the fact that commercial solar projects can be structured in a variety of ways that split the costs and benefits across building owners and tenants to meet different criteria. They also emphasize the variety of financing structures available to fit the needs of the parties involved, and the fact that solar is cost-competitive with utility energy.
As discussed above, commercial PPAs are a great option for small businesses and nonprofits that want the benefits of solar but are unable to cover the upfront costs — despite the fact that the upfront cost is often almost negligible considering the offset of reduced energy bills.
Schedule a demo to learn more about Aurora’s commercial solar capabilities.
According to a Solar Energy Industries Association report, 1,286 megawatts (MW) of commercial solar were deployed in , with two-thirds of all corporate capacity installed just since . The report now tracks more than 8,300 megawatts (MW) of commercial solar projects in the U.S. — over 38,00 projects across 43 states — representing approximately 70% of all installed commercial capacity.
Put another way, there is enough installed commercial solar to power 1.6 million homes.
Still, commercial trails behind the residential market, despite larger project sizes, and is even far behind the utility-scale market. As of , NREL reported that non-residential solar (another term often used for this market) comprised 24% of the total installed capacity in the U.S.
In March , SEIA reported that the pandemic affected commercial more than residential solar installs, with the numbers coming in at 4% less than in .
Despite this relatively slow start, there are a number of indications that this market is poised to take off.
Given the scale of many of the buildings in this sector, you can imagine that as barriers are knocked down, the potential for installed commercial capacity is significant.
In a report, NREL examined the potential size of the C&I solar sector if certain challenges were overcome. They concluded that, at the U.S Department of Energy’s “SunShot targets,” the “techno-economic” potential for offices was 54 GW, for hotels 16 GW, and for warehouses 34 GW for a combined potential across these building types of 104 GW in the U.S.!1
For context, at the end of , the DOE reported that the combined capacity of all installed solar PV and wind power in the country was 144 GW.
Commercial solar can offer many benefits — to building owners, commercial tenants, financiers, installers, and the environment.
For building owners, benefits include increased operating income and cash flow and longer lease terms, as the SEIA/SolarKal white paper notes.
For tenants, reduced operating costs through utility bill savings are an obvious, and very real, benefit.
Of course, there are also benefits for solar contractors that successfully navigate this sector. Commercial solar projects are often a tough sell, but they can have a great impact on overall numbers for solar companies.
The economies of scale at play in these larger projects can make them more lucrative, and that’s on top of the significantly larger total project price tags compared to residential projects.
Be sure to check out the other articles in this series to learn more about the ins and outs of the C&I space. Whether you’re already actively involved in commercial solar, interested in transitioning into this space, or just want to increase your understanding of the industry, our goal with this series is to provide helpful perspectives on how the commercial solar sector works.
In our other posts, we delve into the various players involved in commercial projects, how to sell C&I solar projects, and some of the financing structures for commercial solar projects.
We’re excited for the potential of C&I solar as another key pillar in the growth of solar energy more broadly and hope you are too!